Sunday, 1 September 2019

Week to Aug 30th

Trade war indecision, Euro hits 1.10, GBP down on prorogation

Mon Aug 26
President Trump’s “second thoughts” about the trade war were enough to move markets and the dollar up on Monday. All currencies fell except surprisingly AUD which bounced off a psychological 0.67 triple bottom (the level hit on previous flash crashes). Gold and Bonds initially spiked up but ended flat on the day, and Oil rose in line with indices.

Tuesday August 27
Conflicting trade war signals left indices directionless today. The US was slightly down whereas elsewhere gained, partly due to their currencies. The yield curve (10 year minus 2 year) hit a new low of 5.16bp, the most since 2007. Risk assets Gold JPY and bonds (inverse to yields) were up, and commodity currencies AUD and CAD down, so overall the mood was risk-off. Oil shot up sharply at the end after a large drawdown reported by API, and GBP was up on Brexit deal hopes.

Wednesday August 28
Despite the 30-year bond yield dropping to a record low of 1.905% today (with an appropriate fall in 10-year yields, and further inversion), equity markets were still slightly up except for DAX, following the German 10-year bond auction which also made new lows. The picture was clearer with USD, with all currencies down, particularly GBP which plummeted 130 pips on British PM Johnson’s decision to prorogue (suspend) parliament to prevent no-deal blocking by MPs. Oil carried on rising as the EIA beat at 1430 reflected the API figure from Tuesday.

Thursday August 29
Conciliatory remarks from China today were enough to send equities upwards again, helped by the US GDP figures at 1230 (2.0% in line with estimates, but not a miss). Oil was up in line, as was USD with all currencies and Gold down. Yields were up on bond-stock rotation. A risk-on day.

Friday August 30
Indices made small advances today, but the real story was in currencies. The misses on German Retail Sales at 0600 and more importantly Eurozone inflation at 0900 sent EUR into a tailspin, briefly dipping below the psychological 1.10 level, last seen in 2017. Together with a sharp dip in GBP, the dollar had its best day of the week. Oil gave up some of its earlier gains. Yields were flat, hovering around 1.50%.

Equities were up with NDX making the largest advance. USD was the strongest currency, and very rarely seen, shorting EURUSD was the best trade. Crypto pulled back again, with Bitcoin returning to under $10,000, and FB was the top FANG performer.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)
(Calendar High volatility items are in bold)
  • Non-farm payrolls
  • AUD and CAD rate decisions
  • Brexit court hearings
  • Four-day week

Monday September 02
Today is Labor Day, so US markets are closed, as are Canadian, Malaysian, Bermudan, Indian and Vietnamese markets On Sunday, the next phase of tariffs came in, with 15% on $131Bn of Chinese imports, and about 7% retaliatory tariff on $45Bn of US exports. German regional elections were held on Sunday.

01:45 CNY China Caixin Manuf PMI (e49.8 p49.9)
07:55 EUR Germany Markit Manuf PMI
08:30 GBP UK Markit Manuf PMI
23:01 GBP UK BRC Like-For-Like Retail Sales (YoY)

Tuesday September 03
The main news is the Australian rate statement which is expected to be mildly dovish. There is a court hearing scheduled in Scotland on the legality of UK PM Johnson prorogation (suspension) of Parliament. There is also a rate decision on CLP.

04:30 AUD RBA Rate Decision /Statement (e1.0% hold)
07:00 EUR ECB Nominated President Lagarde speech
07:00 GBP UK court hearing on forcing no-deal Brexit
08:30 GBP UK Markit Construction PMI
13:30 CAD Canada Markit Manufacturing PMI
13:45 USD US Markit Manufacturing PMI
14:00 USD US ISM Manufacturing PMI (e51.0 p51.2)
14:00 NZD NZ GDT Milk Index (time approx)
21:00 USD Fed Rosengren speech

Wednesday September 04
The BoC is expected to make a fairly neutral statement today and hold rates. A raft of Fed speeches today, although it is unlikely these will have a cumulative effect.

01:30 AUD Australia 19Q2 Final GDP (QoQ e0.5% p0.4%)
01:30 JPY BoJ Kataoka speech
01:45 CNY China Caixin Services PMI
07:55 EUR Germany Markit Composite PMI
08:00 EUR Eurozone Markit Composite PMI
08:30 GBP UK Markit Services PMI
09:00 EUR Eurozone Retail Sales (YoY)
11:00 EUR ECB Lane speech
12:30 USD US TB
12:30 CAD Canada TB
13:25 USD Fed Williams speech
13:45 USD US Markit Composite PMI
14:00 CAD BoC Rate Decision/Statement (e1.75% hold)
15:15 CAD BoC Presser
16:30 USD Fed Bowman speech
16:30 USD Fed Bullard speech
17:00 USD Fed Kashkari speech
19:15 USD Fed Evans speech

Thursday September 05
There is a rate decision on SEK, hold expected. SEK is 4.2% of DXY. The NFP ‘sneak preview’ ADP estimate is 150k (p156k) a little lower than the NFP estimate for Friday.

01:30 AUD Aus Imports/Exports/TB
07:00 GBP UK court  hearing on forcing no-deal Brexit
12:15 USD US ADP Employment Change
12:30 USD US Jobless Claims
13:45 USD US Markit Services PMI
14:00 USD US ISM Non-Manufacturing PMI (e54.1 p53.7)
14:30 GBP BoE Tenreyro speech
15:45 CAD BoC Schembri speech

Friday September 06
NFP day for both sides of the 49th parallel today, so expect USDCAD volatility and reversion too mean, maybe as soon as the Canadian PMI 90 minutes later. A US-Mexico trade meeting is scheduled for today. There is a rate decision on RUB. A 0.25% cut is expected. Markets are closed in Bulgaria for Union Day.

06:00 EUR Germany Industrial Production
09:00 EUR Eurozone 19Q2 Final GDP (QoQ e0.2% p0.2%)
12:30 USD US NFP/AHE/Unemp (NFP e159k p164k AHE e3.1% p3.2%)
12:30 CAD Canada NFP/AHE/Unemp (NFP e12.5k p-24.2k)
14:00 CAD Canada Ivey PMI
16:30 USD Fed Chair Powell speech

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